Goldman Sachs cuts 2023 outlook for US growth

Goldman Sachs sees the Federal Reserve moving aggressively to tighten monetary policy throughout the year.

This causes Goldman to cut its US gross domestic product for 2023 and sees the unemployment rate rise more than expected.

In a note released Friday evening, Goldman now sees GDP growth of 1.1% next year, down from its previous call for growth of 1.5% from the fourth quarter of 2022 to the end of 2023.

The Federal Reserve rattled the markets by implementing huge rate hikes in a bid to moderate the highest inflation in 40 years.

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The Goldman Sachs logo is seen on the trading floor of the New York Stock Exchange (NYSE) in New York. (REUTERS/Andrew Kelly/File Photo/Reuters Photos)

The Fed is meeting again this week and another big interest rate hike is on the table, after the Consumer Price Index report came out hotter than expected.

Goldman now expects a 75 basis point hike, down from 50 basis points previously and forecasts 50 basis point hikes in November and December, with the fed funds rate peaking at 4-4.25% by the end of the year.

Federal Reserve Building in Washington, DC

The Federal Reserve Building in Washington. (AP Photo/Patrick Semansky, File/Associated Press)

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“This trajectory of higher rates, combined with the recent tightening of financial conditions, implies a somewhat worse outlook for growth and jobs next year,” Goldman wrote.

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Person filing an unemployment claim

Someone filling out an unemployment benefit form. (iStock/iStock)

The screening for unemployment rate is expected to increase to 3.7% by the end of the year, from 3.6%, and to 4.1% by the end of 2023, from 3.8% previously.

Reuters contributed to this report.

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